Enhancing the Performance of the Services Sector

This report shows that a well-functioning services sector is key to the overall economic performance of OECD countries and to the welfare of its citizens. Reform of services sector policies provides an important opportunity for policy makers to strengthen employment, productivity and innovation. It will also help in strengthening the capacity of OECD economies to adjust to economic globalisation in services and to the growing importance of services for the future growth of OECD economies.

The policies outlined in this report can contribute to such reform and are mutually reinforcing. This is important since seizing the new growth opportunities in the services sector will be possible only through a comprehensive strategy based on a policy mix that is suited to each country or circumstance. The report focuses on the role of labour and product markets, the impact of barriers to trade in services, the role of innovation in services and the impacts of information and communications technology (ICT) on services. It also includes a paper presenting case studies of successful services firms, which points to the importance of open markets, innovation and work organization.

The report responds to concerns about the poor performance of the services sector in many OECD economies. The services sector now accounts for over 70% of total employment and value added in OECD economies. It also accounts for almost all employment growth in the OECD area. But despite its growing weight, productivity growth in services has been slow in many OECD countries and the share of the working-age population employed in services remains low in many countries. If policy makers wish to strengthen economic growth and improve the foundations for the future performance of OECD economies, the services sector will need to do better than at present.

This report provides the background to the synthesis report and brings together nine papers that were presented at an OECD workshop in February 2005. The studies address the main areas of the OECD work, notably trends and patterns in services (Chapter 2), the role of labour and product markets (Chapter 3), the benefits of opening international markets to trade in services (Chapters 4 and 5), innovation in services (Chapter 6), the role of ICT in services and the increasingly global nature of some services (Chapters 7 and 8), as well as case studies from successful services companies (Chapter 9). The synthesis report to Ministers is reproduced as Chapter 1 of the report, and also serves as the introduction.

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